Is India a "success"?
lnp3 at panix.com
Tue Jan 21 08:59:04 MST 2003
The economies of South Asia – and especially India – are often portrayed
in comparative discussion as among the ‘success stories’ of the
developing world in the period since the early 1990s. The sense that the
Indian economy performed relatively well during this period may simply
reflect the much more depressing or chaotic experiences in the rest of
the developing world, with the spectacular financial crises in several
of the most important and hitherto dynamic late industrialisers in East
Asia and Latin America, and the continuing stagnation or even decline in
much of the rest of the South. In comparison, the Indian economy, and
indeed most of the smaller economies of the region, were largely stable
and have been spared the type of extreme crisis that became almost a
typical feature of emerging markets elsewhere. But the picture of
improved performance is a misleading one at many levels, since in fact
both India and the entire South Asian region as a whole experienced
economic growth which was less impressive than the preceding decade’s.
Further, across the region this growth pattern was marked by low
employment generation, greater income inequality and the persistence of
poverty. In other words, despite some very apparent successes in certain
sectors or pockets, on the whole the process of global economic
integration did little to dramatically improve the material condition of
most of the population.
In India, the rate of growth of aggregate GDP in constant prices was
between 5.5 percent and 5.8 percent in each five-year period since 1980,
and the process of accelerated liberalisation of trade and capital
markets did not lead to any change from this overall pattern. Further,
while investment ratios increased (as a share of GDP), this reflected
the long-term secular trend, and in fact the rate of increase
decelerated compared to earlier periods. More significantly, the period
since 1990 has been marked by very low rates of employment generation.
Rural employment in the period 1993-94 to 1999-2000 grew at the very low
annual rate of less than 0.6 percent per annum, lower than any previous
period in post-independence history, and well below (only one-third) the
rate of growth of rural population. Urban employment growth, at 2.3
percent per annum, was also well below that of earlier periods, and
employment in the formal sector stagnated. The only positive feature was
the decline in educated unemployment, largely related to the expansion
of IT-enabled services in metropolitan and other urban areas. However,
while this feature, along with that of software development, has
received much international attention, it is still very insignificant in
the aggregate economy.
Other indicators of the Indian economy point to disturbing changes in
patterns of consumption. Thus, per capita foodgrain consumption declined
from 476 grams per day in 1990 to only 418 grams per day in 2001. The
National Sample Survey data also suggest that even aggregate calorific
consumption per capita declined from just over 2200 calories per day in
1987-88 to around 2150 in 1999-2000. It has been argued that this may
represent the positive diversification of consumption away from
foodgrain that is associated with higher living standards. But, usually
the aggregate foodgrain consumption does not decline due to indirect
consumption (for example, through meat and poultry that require feed).
In any case, the overall decline in calorific consumption (covering all
food products) suggests that the optimistic conclusion may not be valid.
Given the aggregate growth rates and the evidence of improved lifestyles
among a minority, this points to substantially worsening income
distribution in India, which is also confirmed by the survey data. While
the evidence on poverty has been muddied by changes in the procedure of
data collection, which have made the recent survey data non-comparable
with earlier estimates, overall indicators suggest that while the
incidence of head-count poverty had been declining from the mid-1970s to
1990, subsequently that decline has been slowed or halted, as indicated
by the economist Abhijit Sen. Meanwhile, declining capital expenditure
by the government has been associated with more infrastructural
bottlenecks and worsening provision of basic public services.
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